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i\10/l;lWE. WISCONSIN

Phone: (608) 325-3021 Fax: (608) 325-3027

W7839 State Road 81 Monroe, WI 53566

Odyss~ ~ t;wiscousiUe

FETA CHEESE GREEK YOGURT MUENSTER & BRICK

Hello, my name is Steve Buholzer. My brothers and I, and our children, own Klondike

Cheese Co. It is a midsize cheese factory located in Monroe, WI. Klondike was

established in the late 1800's as a co-op. In 1925 my grandfather, Ernest Buholzer, was

hired by the co-op as a cheese maker. In 1947, my father Alvin and my mother Rosa

took over the management of the co-op. In 1973, our family bought the co-op. Over

the years we have produced a variety of cheeses to try to stay profitable . Klondike

Cheese Co. currently manufactures traditional Feta, flavored Feta, Brick, Muenster and

Havarti cheeses and most recently, Greek yogurt.

In 2001, Klondike expanded its business by constructing a new cheese manufacturing

facility and installing a computerized, fully automated coagulator. With the addition of

the coagulator and advanced technology, Klondike has more than doubled their

production of Feta to meet the growing demand for this specialty cheese. In 2013,

Klondike expanded again to produce Greek yogurt.

In the 1940's we produced 4 wheels of Swiss cheese per day. Today we produce over

125,000 Ibs. of cheese a day. In the 1980's we were a sma ll family business with 8

employees. We now have 162 employees. We have grown from 10 patron farms to

75. Our current patrons are larger and produce more milk than our early patrons. We

have gone from processing 20,000 Ibs. of milk per day to 1,000,000 Ibs. of milk per day.

2014 American Cheese Society Contest Feto Cheese 1 Best of Class Flavored Fete Cheese I Best of Class, Second, and Third Places Reduced Fat· Lighl/lne and Reduced Fat Cheeses I Second Place Fot-Free/ low-Fot Fete Cheese I Third Place

i 2013 United States Cheese Championship Contest

Flavored Fete I Best of Class & Second Place low-Fat Cheese & Fat free Feto I Best of Class & Third Place

Reduced Fat SoH & Semi· SoH Cheeses I Second Place

CHEESE COMPANY ~ IONROE. WISCO:\5IN

Phone: (608) 325-3021 Fox: (608) 325-3027

W7839 stote Rood 81 Monroe, WI 53566

se~ ,-~wi5con5in':' ;=S:Tu. ::-:=S5:: GP.EE!{ ':'OG!j~T MUENSTER & BRICK

Klondike Cheese Co. currently sells cheese and yogurt to many national retailers and

foodservice distributors. Our product mix is 75% foodservice and 25% retail. We sell

our own Odyssey branded product as well as private label.

We are located 7 miles from the nearest municipality and therefore have to process

our own wastewater. In 2006, we upgraded our wastewater facility at a cost of $3.9

million and ongoing operation costs of $300,000 each year. Our wastewater treatment

plant is an anaerobic and aerobic pretreatment system . We spread the treated water

on 100 acres of land that we own. Alfalfa is grown and harvested, on this land, by local

farmers. Hydraulic loading is an issue for us. We are limited in the amount of

wastewater we can process in 1 day due to our limited acreage. There is no adjacent

land for purchase that would allow us to expand.

Due to these land constraints and tighter DNR requirements, we are in the planning

stages of an upgrade to a higher rate system, at an estimated $3 million. This will allow

us to expand our cheese and yogurt production only, but will not allow us to expand

into whey drying.

For a small to midsize cheese manufacturer, the demands for our whey stream have

changed dramatically. In the 1960's, all of the whey went back to local farms to be

used as hog feed. As more farmers got out of the hog business, the whey started to

become a burden. Klondike put in equipment to at first ship warm whey to a drying

2014 American Cheese Society Contest Feto Cheese I Best of Closs Flavored fete Cheese I Best of Class, Second, a nd Third Places Reduced Fat- Light/ Lite and Reduced Fat Cheeses I Second Place Fot -Free/ low-fot Feta Cheese I Third Place

z 2013 United States Cheese Championship Contest

flavored feta I Besl of Class & Second Place Low -Fat Cheese & Fat Free Fete I Best o t Class & Third Place

Reduced Fat SoH & Semi-Soft Cheeses I Second Place

Phone: (608) 325-3021 W7839 state Road 81 Fax: (608) 325-3027 Monroe, WI 53566

Odysse) ,. Swisconsinc:' ,\ION ROE. WISCOi'SIN FETA CHEESE GREEK YOGURT MUENSTER & BRI CK

facility for animal feed. A few years later we upgraded to cool the whey and were able

to ship it to a plant that made whey protein concentrate. In 1984, we installed our first

ultra-filtration system. This allowed us to sell WPC34 to a neighboring whey processing

facility, in order to gain revenue . At that time, permeate was spread on the land as

fertilizer. In 2004, we installed a reverse osmosis system for the permeate, so that we

could increase the solids and sell it to a neighboring processor to increase revenue. Our

whey processing capabilities are limited by our production of Feta cheese. Feta cheese

produces a higher acid whey that must be blended with other whey in order to be

dried. This fact, along with our limited waste water capacity, only allows us to sell

liquid products to a larger whey processing facility, thus limiting the amount of

revenue we can generate. At this time, Klondike Cheese has no other options to

recoup any additional revenue from its whey stream.

The issue is that the other solids milk price is based on the dry whey price, which

doesn't accurately reflect on our whey revenue. So there are months that Klondike

Cheese cannot earn revenues on concentrated whey and permeate that meet the

whey value in the class 3 milk price. This will be demonstrated in the attached

spreadsheet. This deficit hinders our ability to invest in our operation, in the face of

ever increasing costs brought on by buyer demands, food safety requirements,

environmental regulations and overheads.

2014 American Cheese Society Contest Feta Cheese I Best of Closs Flavored Fete Cheese I Best of Class, Second, and Third Places Reduced Fat· light/ Lite and Reduced Fat Cheeses I Second Place fot~ free/low-Fat Feto Cheese I Third Place

3 2013 United Stotes Cheese Championship Contest

Flavored Fete I Best of Class 8. Second Place Low-Fat Cheese & Fat Free Feto I Best of Class & Third Place

Reduced Fat Soft & Semi· Soft Cheeses I Second Place

Klondike Cheese Whey P&L

Milk Purchases NOM Purchases TOTAL NOM Estimated Estimated FMMOOS Calculated

2014 TOTAL MILK Milkfat Milk Protein Milk OS Lbs. NOM Protein NOMOS per # OS Cost

JAN 11.526,621 458,489 361,444 655,880 467,185 168,187 298,998 $0.4155 $396,752 FEB 11,586,740 464,912 362,387 656,676 496,549 178,758 317,791 $0.4453 $433,930 MAR 13,882,303 544,422 428,256 787.020 573,655 206,516 367 .139 $0.4700 $542,455 APR 14,995,495 575,470 458.133 852,089 686,839 247,262 439,577 $0.4926 $636,275 MAY 15.513.855 578,442 469,949 885 ,348 695,782 250,482 445,300 $0.4897 $651,619 JUN 14,971,185 543,208 442,028 861,455 681 .333 245,280 436,053 $0.4942 $641,229 JUL 15.705,478 577,843 465,644 899,419 685,076 246.627 438,449 $0.5046 $675,088 AUG 13,558,479 501 ,347 399,762 774,143 550,248 198.089 352,159 $0.5036 $567 ,205 SEP 13,326,743 503,322 403,623 760,570 573,974 206,631 367,343 $0.4876 $549,970 OCT 13,875,626 549.889 432,824 794,810 577.575 207,927 369,648 $0.4652 $541,706 NOV 13,069,626 511 ,930 412,145 748,827 463,719 166,939 296,780 $0.4505 $471 .046 DEC 13,849851 533,848 430949 794950 466,766 168,036 298,730 ~03996 $437 ,034

TOTALS 165,862,002 6,343,122 5,067,144 9,471 ,185 6,918,701 2,490,732 4,427,969 $0.6910 $6,544,309 t , \.Vl ~..LA Uf O t~ \ (I i' '1/, COn~nT( A -t E'_ ,::)CI. \ ' ':0,

..,). UF Whey Sales Whey Permeate Sales TOTAL Cost of Products Sold Margin from Whey TOTAL AVERAGE TOTAL UF TOTAL AVERAGE TOTAL PERM WHEY FMMOOS Processing Net Marg in per

2014 POUNDS PRICE 1# REVENUE POUNDS PRICE 1 # REVENUE REVENUE Cost Cost Net Margin Cw!. Milk

JAN 278,120 $1.5456 $429.852 504 ,312 $0.1000 $50,431 $480,283 -$396.752 -$25.905 $57,626 $0.4999 FEB 252.068 $1.5869 $400,015 521 ,557 $0.1000 $52. 156 $452,171 -$433.930 -$23,478 -$5,237 -$0.0452 MAR 291,049 $1.5588 $453,694 544,358 $0.0945 $51,436 $505,130 -$542,455 -$27.109 -$64,434 -$0.4641 APR 339,667 $1.5593 $529,639 593.093 $0.1000 $59,309 $588,948 -$636,275 -$31,638 -$78,965 -$0.5266 MAY 343,272 $1.5488 $531 ,665 652,114 $0.0935 $60,958 $592,623 -$651,619 -$31,973 -$90,969 -$0.5864 JUN 319,136 $1.4724 $469,909 639.638 $0.0930 $59.509 $529,418 -$641.229 -$29,725 -$141,536 -$0.9454 JUL 346,421 $1.4125 $489.308 635,706 $0.0984 $62.552 $551,860 -$675,088 -$32.267 -$155,494 -$0.9901 AUG 250,634 $1.5307 $383,640 565.070 $0.0989 $55,888 $439,529 -$567,205 -$23.345 -$151,021 -$1.1139 SEP 258,572 $1 .5044 $388,991 618,290 $0.0949 $58,689 $447,679 -$549,970 -$24,084 -$126,375 -$0.9483 OCT 281 ,447 $1.4013 $394,403 558,169 $0.101 1 $56.406 $450,808 -$541,706 -$26,215 -$117,112 -$0.8440 NOV 242,140 $1.3110 $317,456 492.888 $0.0982 $48.394 $365,850 -$471.046 -$22.554 -$127,750 -$0.9775 DEC 278,095 $1 .1932 $331 823 506,783 $0.1020 $51,671 $383,494 -$437.034 -$25,903 -$79,443 -$0.5736

TOTALS 3,480,620 $1.4711 $5,120,395 6,831 ,978 $0.0977 $667,398 $5,787,793 -$6,544,309 -$324,196 -$1,080,711 -$0.6516

Whey Operating Costs 2014 labor $112,720 Chemicals/Cleaning $41,600 Electric Cost $46,280 Wastewater $55,000 Depreciation $3,596

Membrane Replacement

3 Y Membrane life ~41,667 $125K over 3 Years

1.5 Year Membrane life ~23,333 $50K aver 1.5 Yea rs

Total Costs $324,196 Per Year

$27,016 Avg Per Month

$0.0931 Avg Per 1/ UF Solids